Virgin Media Inc. (VMED) outperforms in the third quarter of 2010 supported by higher revenue, higher operating income, and customer’s preference towards the company’s bundled services. Contrary to the Zacks Consensus Estimate of a loss from continuing operations, Virgin Media achieved profitability.

Quarterly total revenue of approximately $1,517 million was up 6.4% year over year and far ahead of the Zacks Consensus Estimate of $1,461 million. This was primarily due to significant growth of all four reporting segments, particularly the Mobile and Business segments. The revenue growth in the reported quarter was the highest for Virgin Media within the last four years.

Net income in the quarter was approximately $42.8 million or 12 cents per share compared to a net loss of $98.1 million or 30 cents per share in the prior-year quarter. Quarterly EPS of 12 cents was significantly above the Zacks Consensus Estimate of a loss of 8 cents.

Quarterly cost of sales was $613.2 million, up 5.6% year over year. SG&A expense was $303 million, which remained the same year over year. Total operating expenses were $1,359 million, up 1% year over year. Quarterly operating income was $157.6 million, up by a whopping 99% year over year.

During the third quarter of 2010, Virgin Media generated approximately $600.3 million of cash from operations, up 11% year over year. Quarterly free cash flow was around $185.1 million, up 8.6% year over year.  

At the end of the third quarter 2010, Virgin Media had approximately $945.2 million of cash and cash equivalents, up 41.7% from the end of fiscal 2009.  At the end of the same quarter, total outstanding debt was around $9,274.1 million, up 0.2% from the end of fiscal 2009. At the end of the reported quarter, debt-to-capitalization ratio was 0.82 compared to 0.80 at the end of fiscal 2009.

Subscriber Statistics

During the third quarter of 2010, Virgin Media added 99,900 net new customers, raising its customer base to 13,486,500. Net customer addition for the Broadband segment was 35,100, resulting in a total subscriber base of 4,242,900.

Within this Broadband segment, more than 700,000 customers subscribed to either 20 Mbps or 50 Mbps services. This figure is an improvement of 41% year over year and now constitutes 18% of total cable Broadband subscribers. 90,000 customers now use only 50 Mbps services, up 24% sequentially.

Net customer addition for the TV segment was 14,800, resulting in a subscriber base of 3,766,700. During the reported quarter, Virgin Media added 222,100 HDTV customers, leading to a installed base of 1.4 million and HDTV penetration rate of 38%.

Net customer loss for Telephone segment was 7,500, which resulted in a subscriber base of 4,322,200. Net customer addition for Mobile segment was 57,500, resulting in a subscriber base of 1,154,700.

The company’s bundled service offerings are getting increasing market traction. At the end of the third quarter of 2010, triple-play penetration increased 62.7% year over year and quad-play penetration increased 11.5% year over year.

Consumer Segment

Overall quarterly revenue of the Consumer segment was approximately $1,280.6 million, up 6.5% year over year. Within this segment, Cable revenue was $1,027 million, an improvement of 5.6% over the prior-year quarter. ARPU (average revenue per user) from Cable services increased nearly 3.7% year over year to $71.9 in the reported quarter. Average monthly Cable churn increased slightly year over year at 1.6%. Mobile revenue was around $222.4 million, up 7% year over year. Non-Cable revenue was $31.2 million, up 39.6% year over year.

Business Segment

Overall Business segment revenue in the quarter was nearly $235.9 million, up 6.2% year over year. Within this segment, the high-margin Retail data revenue was $94.7 million, up 10.3% year over year. Retail voice revenue was $63.9 million, down 7% year over year. LAN solutions revenue was $14.4 million, up 22.4% year over year. Wholesale revenue was more than $62.9 million, up 12.8% year over year.

 
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